The bill to companies for ‘inadequate’ daycare in Mass.: $1 billion-plus a year

New report finds widespread turnover due to lack of available childcare in state

Lawmakers on Beacon Hill are considering new subsidies to the daycare industry. The Massachusetts Taxpayers Foundation released a report that finds the state's childcare shortage has cost companies roughly $1 billion in turnover and related expenses due to workers leaving jobs for lack of childcare.Tim Graham/Photographer: Tim Graham/Getty I

Employers know firsthand that the COVID-19 pandemic has taken its toll on parents scrambling for childcare. Now, the bosses have an actual price tag to put the economic damage in precise financial terms.

The Massachusetts Taxpayers Foundation released a report on Thursday that outlines the detrimental impacts the childcare shortage is having on the state’s economy. Among the eye-popping stats: Inadequate childcare cost businesses in Massachusetts an estimated $97 million a month last summer and fall, or more than $1 billion a year — largely because of employees who have left jobs to care for their kids and the disruption that turnover caused. From March 2020 through October 2021, 1,200 childcare providers had permanently closed in Massachusetts, according to the report; even when factoring in 725 newly opened programs, the state still had 6,200 fewer childcare openings last fall than it did before the pandemic.

“We know there’s a workforce problem for Massachusetts, and I think there’s an early education [problem],” said Eileen McAnneny, president of the business-backed organization. “It’s really important that we realize the interconnectedness of them. By recognizing this and trying to solve it in this way, it better positions Massachusetts for economic recovery.”

The report’s arrival comes as lawmakers on Beacon Hill debate how to support the beleaguered industry.

JD Chesloff, president of the Massachusetts Business Roundtable, said the report validates the business community’s call for investing in childcare as a workforce development strategy.

“It feels like we’re at a time where the public sector and private sector are aligned to doing something about this,” Chesloff said. “The timing is really good, as the Legislature is debating this stuff, to really understand the economic impact.”

Toward that end, the House leadership proposed increasing funding by $70 million, to raise the rates for subsidized childcare providers, in its budget plan for the fiscal year that begins in July, including $10 million for slots for parents who work in childcare themselves. The House also supports changing the funding formula to reimburse childcare providers based on enrollment numbers, instead of daily attendance, at a cost of about $8 million a year, Chesloff said.

The House decided not to include money for the Commonwealth Cares for Children program, which makes grants available to all childcare providers, regardless of whether they receive other public subsidies. Governor Charlie Baker had asked the Legislature to replenish these so-called “C3″ stabilization grants by spending $450 million to extend the program for another year. The Legislature has not yet granted Baker’s request, although the Senate still has to draw up its budget proposal for the new year.

Massachusetts has the most expensive childcare costs of any state in the US — an average of roughly $21,000 per slot, for infants, and $15,000 for toddlers — so employers recognized this was an issue even before the pandemic.

However, Eastern Bank chief executive Bob Rivers said the pandemic drove home the problem for executives. Rivers said he worries about the impact on the state’s competitiveness, particularly given the high cost of housing here, too. He began building a coalition to address the issue in 2019, but gained far more traction among other companies after the pandemic hit. By the time Eastern Bank’s foundation launched the Massachusetts Business Coalition for Early Childhood Education in February 2021, more than 70 employers were on board.

“When the pandemic hit, and the childcare system was obliterated, all of a sudden it’s like ‘Oh yeah, it’s a real issue,’ ” Rivers said.

It’s not just about public policy. Rivers said he hopes the new report will help spur private-sector employers to improve their childcare benefits. He cited one company, Brockton-based bank HarborOne, as an example of an employer stepping up; in late 2020, the bank began offering up to $600 a month to help bank employees work through a time when many schools were not fully open. (The bank has since scaled back its maximum to $2,000 a year per family.)

“Businesses are starting to learn from each other,” Rivers said. “We can’t just look to government to solve all this entirely.”